Foster’s rejects takeover offer, More flights cancelled due to ash: Midday Roundup

Foster’s shares have jumped over 13% this morning after the company announced it had rejected a $9.5 billion takeover offer from SABMiller, with the brewing giant saying the price was too low.

Foster’s shares were at $5.10 at 12.00 AEST.

“The board of Foster’s believes that the proposal significantly undervalues the company in the context of a change of control and, as such, it does not intend to take any further action in relation to it,” the company said.

The SABMiller bid was pitched at $4.90.

Virgin cancels flights due to ash cloud

The volcanic ash cloud from South America has once again impacted on domestic flights, with Virgin announcing that all flights between Melbourne and Sydney will be cancelled due to ash blocking flight paths.

While Virgin had previously announced it would suspend all services in and out of Mildura and Adelaide, Fairfax now reports flights in and out of Sydney and Melbourne will be cancelled as well from 4pm.

It is expected that a decision on flights for tomorrow will be made later today.

Qantas previously announced today that Sydney flights would be affected, while Tiger Airways has also delayed flights until this afternoon.

RBA in no hurry on rates

The Reserve Bank of Australia believes another rate hike is needed but soft economic data released in the past month held it back, minutes of the June meeting have revealed.

At the June meeting, the RBA decided to keep the interest rate on hold at 4.75%, but members believe a hike is inevitable.

It noted weakness in the domestic economy and said households have continued to be cautious with their money.

“Notwithstanding above-average sentiment about the general outlook for the economy, surveys continued to suggest that households’ perceptions of their own personal finances over the coming year were well below average.”

It also said the housing market has remained soft, and noted employment growth has remained soft as well.

“Members considered that the medium-term outlook for the economy was broadly as discussed at the May meeting,” it said.

“While inflation was currently in the bottom half of the target range in underlying terms, this had been partly due to the disinflationary effects of the appreciation of the exchange rate and the earlier moderation in labour costs.”

“If the economy evolved in line with the staff forecasts, GDP growth would be somewhat above trend over the next few years, led by growth in the resources sector. A gradual pick-up in inflation could be expected under this scenario.”

The RBA said that the outlook suggests that further tightening of monetary policy would be necessary at some point, but the recent data suggests there isn’t any urgency to make that decision.

Shares higher after Wall Street lead

The Australian share market has opened higher this morning after a strong lead from Wall Street, where shares have risen after investors became more satisfied over plans for Greece to reduce its debt.

The benchmark S&P/ASX200 index was up 47 points or 1% to 4499 at 12.00 AEST, while the Australian dollar was down to $US1.05c.

AMP shares rose 0.64% to $4.70, while Commonwealth Bank shares rose 1.23% to $50.11. NAB shares lifted 0.82% to $24.64 as Westpac gained 1.52% to $21.44.

In the United States the Dow Jones Industrial Average rose 76 points or 0.63% to 12,080.83.

Commodity export earnings to rise 18%

Commodity export earnings will increase to $256 billion in 2011-12, representing an 18% increase from the current year, according to the latest forecast from the Australian Bureau of Agricultural and Reserve Economics and Sciences.

“Forecast increases in export prices and shipments for Australia iron ore and metallurgical coal are the main reasons for the expected increase in mineral resources exports,” ABARES acting deputy executive director Kim Ritman told Reuters.

“Strong export performance is also expected for other commodities including thermal coal, gold and alumina.”